The Largest Tax Hike in 25 Years?

Plus, Democrats’ controversial partisan strategy on drug prices

Democrats’ Controversial Partisan Strategy on Lowering Drug Prices

The House is set to vote Thursday on a package of three bipartisan bills aimed at lowering drug prices, but Democratic leaders combined those measures with four other proposals to reverse the Trump administration’s controversial changes to the Affordable Care Act, putting Republicans in a bind.

“The move is likely to force most Republicans to sink the package and go on record as opposing efforts to control drug costs,” Politico’s Adam Cancryn and Sarah Owermohle report. “Mixing Obamacare with drug pricing would also effectively kill the legislation’s chances in the GOP-controlled Senate.”

The strategy has reportedly angered Republicans and generated some grumbling from centrist Democrats who wanted to put a bipartisan win on the board. “You had three good pieces of legislation here,” Rep. Tom Cole (R-OK) told House Energy and Commerce Committee Chairman Frank Pallone (D-NJ), according to The Washington Post. “Why not just package the ones you know are going to get through? And then we can continue to fight out our differences on the other four.”

House Democrats say the move was about budgeting, not just politics: “The trio of drug pricing bills would collectively save about $4 billion over a decade, making them valuable offsets for the Obamacare bills that call for greater federal spending to shore up the health law's insurance markets and reverse cuts imposed by the administration,” Cancryn and Owermohle say. But they note that Democratic leaders saw the political benefits of the strategy — effectively daring Republicans to vote against legislation to lower drug prices — as being greater than the risks involved.

House Democrats reportedly hope to revive the drug pricing measures later in the year and include them in broader must-pass legislation.

Trump Administration Wants More Health Care Price Transparency

As part of a push for more price transparency in the health care sector, the Trump administration is interested in forcing insurers to disclose the negotiated rates they pay for services, The Wall Street Journal’s Stephanie Armour reported Wednesday. The White House also wants doctors and hospitals to tell patients the total price for their care before the services are rendered, whether or not the health-care providers are in the patient’s insurance network.

Would it work? “Supporters say that requiring price and rate disclosure could fundamentally alter economic forces in the industry, potentially driving down costs if hospitals and doctors lower prices to match competitors,” Armour writes. “But critics say it wasn’t clear whether enough consumers would use price information to seek out lower-cost treatment and bend the cost curve. And the proposals would likely be met with stiff industry opposition, including lawsuits challenging the White House’s authority to mandate cost disclosures.”

The bottom line: It’s not at all clear that greater transparency will lead to lower prices, given cases where providers have monopoly power, the Kaiser Family Foundation’s Larry Levitt told Axios. It could even result in some prices rising, he said: "With greater transparency, there's the distinct possibility that low-priced hospitals will demand higher rates once they find out what their competitors are getting paid.”

Trump’s Tariffs Equivalent to Largest Tax Hike in 25 Years: CNBC

Many economists see tariffs as a tax that is ultimately paid by consumers. Viewed that way, President Trump’s tariffs amount to the largest tax hike in more than two decades, says CNBC’s Steve Liesman.

“A CNBC analysis of data from the Treasury Department ranks the combined $72 billion in revenue from all the president’s tariffs as one of the biggest tax increases since 1993,” Liesman wrote Thursday. “In fact, the tariff revenue ranks as the largest increase as a percent of GDP since 1993 when compared with the first year of all the revenue measures enacted since then, according to the data.”

The revenue from Trump’s tariffs equals 0.34% of U.S. GDP, Liesman said, the largest increase in federal revenue from the first year of a single measure since the Omnibus Budget Reconciliation Act of 1993, also known as the Deficit Reduction Act, which generated revenue equal to 0.36% of GDP.

Kyle Pomerleau of the Tax Foundation said that while Trump’s tariffs “rank among some of the bigger tax proposals over the last 20 years,” it’s important to note that they aren’t treated like a tax by lawmakers. As a result, there is no formal analysis by the Congressional Budget Office and the Joint Committee on Taxation on how they will affect the economy, jobs and inflation.

Chart of the Day: Deductible Relief

You may be familiar with the concept of Tax Freedom Day — the date on which you have earned enough to pay all of your taxes for the year. Focusing on a different kind of financial burden, analysts at the Kaiser Family Foundation have created Deductible Relief Day — the date on which people in employer-sponsored insurance plans have spent enough on health care to meet the average annual deductible.

Average deductibles have more than tripled over the last decade, forcing people to spend more out of pocket each year. As a result, Deductible Relief Day is “getting later and later in the year,” Kaiser’s Larry Levitt said in a tweet Thursday.

Health Care CEOs Made $2.6 Billion in 2018: Report

The CEOs at 177 health care companies collectively earned about $2.6 billion in 2018, according to a new analysis of corporate financial filings by Axios.

The highest paid CEO in the group was Regeneron Pharmaceuticals’ Leonard Schleifer, who took home $118 million in 2018. Pharma CEOs accounted for 11 of the top 25 earners.

The great majority of the CEO pay came from stock options and awards, Axios’s Bob Herman said, with salaries making up only a small portion of overall compensation. “The pay packages reveal the health care system's real incentives: finding ways to boost revenue and stock value by raising prices, filling more hospital beds, and selling more drugs and devices,” Herman wrote.

One thing that doesn’t seem to play much of a role in overall compensation: quality of care.

The total for overall compensation is no doubt higher, Herman said, because the analysis did not include the earnings of CEOs at not-for-profit hospital systems, which haven’t yet released their tax filings. Hospital CEOs are typically highly paid, with chief executives at large systems such as New York-Presbyterian earning more than $10 million a year.

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Congressional Leaders Name Next CBO Director

Lawmakers have named Phillip Swagel, an economist at the University of Maryland and former Treasury official under President George W. Bush, as the next director of the Congressional Budget Office, the nonpartisan office that advises Congress on the projected costs of legislation.

Swagel will begin his term on June 3, succeeding Keith Hall, who has continued to head the agency temporarily since his four-year term officially ended in January. Swagel is currently a professor of International Economic Policy at the University of Maryland School of Public Policy and a nonresident scholar at the American Enterprise Institute, a right-leaning think tank. He served as assistant Treasury secretary for economic policy from 2006 to 2009 and was also chief of staff and a senior economist on the White House Council of Economic Advisers under Bush. His term at CBO is set to end January 3, 2023.

“Dr. Swagel’s strong academic and government experience, as well as his knowledge and expertise in economic forecasting will serve him well as he leads CBO,” Sen. Mike Enzi (R-WY), chairman of the Senate Budget Committee. “I am confident he will lead the agency with integrity and maintain the office’s reputation for non-partisan analysis. I would also like to thank Dr. Hall for his years of dedicated service to Congress and wish him well.”

Enzi reportedly led the way in choosing Swagel under an informal arrangement in which the primary role alternates between the House and Senate Budget chairs.

Roll Call’s Paul M. Krawzak, who first reported Swagel’s appointment, notes that Hall had expressed a desire to stay on for another term, but Enzi chose to replace him, citing a source familiar with the discussions. “The Wyoming Republican valued transparency and disclosure at the CBO, something Hall actively tried to promote during his tenure at the agency,” Krawzak writes. “Nonetheless, over time Enzi had grown dissatisfied with the level of communication and updates he was getting from the CBO under Hall’s leadership, according to the source.”

Republicans have also been critical of the agency for some of its recent projections, including findings that GOP proposals to repeal and replace the Affordable Care Act would result in millions more Americans being uninsured and estimates that the 2017 tax overhaul would add well over $1 trillion to the deficit over 10 years.

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